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Toyota Looks to the Future

Kathleen Jordan on
Saturday, December 1, 2012

To echo a recent Strategic Sourceror post titled “Labor unrest can disrupt entire supply chains”, companies need to be mindful of the conditions of their suppliers' manufacturing locations as they could impact their supply chains in a major way. Toyota is one company whose current focus is not on its suppliers’ manufacturing operations, but rather its very own, and particularly on the individuals it employs in its U.S.-based manufacturing facilities.

A Wall Street Journal article published yesterday discusses the incentives Toyota recently offered to 2,000 of its U.S. manufacturing workers who are nearing retirement. Roughly 1,600 of the overall 2,000 workers are based out of Toyota’s Georgetown, Kentucky factory. This factory is approaching its 25th birthday, and in turn, many employees who began work in this factory when it first opened its doors are approaching retirement. According to a Bloomberg article, the Georgetown, Kentucky plant has a total of 6,600 workers; therefore, about 25% of its workforce is expected to retire very soon. As noted in the WSJ, Toyota is making an attempt to "'prevent a mass exodus next year...by requiring eligible workers to leave at company-specified dates rather than when they become eligible', said a spokesman." If this offer is accepted, the employees would receive retirement incentives in the form of "a lump-sum payment equal to two weeks of pay for every year of service, up to a maximum of 25 years, plus eight weeks additional pay." Toyota's plan is to have the workers leave in accordance with a schedule that allows them to gradually replace the veteran workers with replacements. Per Bloomberg, "workers who accept the incentive package will retire in staggered intervals starting in February."

Not only will Toyota be in a better position to continue its normal output with this approach, it also stands to benefit in the long run since the new employees will be starting at an estimated $16 hourly rate compared to the $26 rate currently extended to the upcoming retirees. This rate reduction is being seen across the entire automobile industry. In the past year, Ford hired over 4,000 new workers and the decrease in wage rate is having a dramatic impact on its U.S. manufacturing costs.

Overall, it is important to always be mindful of the factors that pose a threat to your company's operations and profitability. Toyota is making an effort to eliminate as much risk as possible with regards to their internal operations. Efforts should also be extended to eliminate all risk factors that may apply within a company's supplier network.

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